MG Rover administrators say they intend to break up company

Friday, April 8th 2005, 8:26 am

By: News On 6

LONDON (AP) - MG Rover Group arrived at the end of the road Friday as administrators for the stricken company - Britain's last major car manufacturer - said they intend to break it up, laying off 5,000 workers, after the Shanghai Automotive Industry Corp. made clear it was not interested in a joint venture.

Rover's downfall was precipitated by the failure of talks with China's state-owned SAIC about a joint venture, and renewing the negotiations had been seen as the best chance of saving the company and the jobs of some 6,100 workers at its Longbridge factory in central England.

PricewaterhouseCoopers, which was appointed to oversee the company's future after it closed the plant and filed for a form of bankruptcy a week ago, said there was now no prospect of a sale of the company as a going concern to SAIC or anybody else.

The resulting loss of jobs at Rover, and among 18,000 other workers at companies who supply parts to the automaker, is a development that could not come at a worse time for the British government, just weeks ahead of a general election.

"We'll explore what we would describe as the break-up of the business, we will carry on with the interested parties who want to talk about pieces of the business," said PwC joint administrator Tony Lomas.

Rover had hoped the deal with SAIC would generate cash to allow it to introduce new models and stem the falling sales of its current makes. The company, which turned out 40 per cent of the cars bought in Britain in the 1960s, has not produced a new model since 1998 and now holds only a three per cent share of the market.

But Lomas said that terms of a letter sent to the government, and copied to PwC, from SAIC officials early Friday were "clear and unambiguous."

"The SAIC board had concluded that in its view, MG Rover and (subsidiary) Powertrain Ltd. could not emerge from this process in a state which would justify then investing in it," Lomas said.

"As a result of that, they said they were not therefore willing to acquire, either in whole or in part, on a going concern basis, the business and assets of this business. Nor were they willing to enter a joint venture with a third party," he added.

Lomas said Rover had received expressions of interest from more than 70 other companies, but "the vast majority of that interest was either for specific, smaller parts of the business, for example the MG brand. . . or was very, very early in the level of understanding the inquirer had about the business" and did not address the substantial funding needed.

"Our conclusion was that none of these other interested parties was likely to result in a transaction for the sale of the business as a going concern," he said.

Rover's collapse provides an embarrassing backdrop to the ruling Labour Party's election campaign, which is centred on the strength of the British economy, for the May 5 poll.

Prime Minister Tony Blair and Treasury Secretary Gordon Brown cancelled election commitments Friday to travel to central England, where they announced a 150-million-pound ($284-million US) support package for Rover workers.

"We tried our level best to persuade the Chinese company to enter into a venture with MG Rover, it's not been possible to do that," Blair said. "Having done everything we possibly can to save Longbridge, what we've got to now do is look after the work force and the families of the workforce."

PwC said the failure to pin down a deal with SAIC meant the administrator could not ask for an extension of a 6.5-million-pound ($12.2-million US) emergency loan from the government to pay workers.

Lomas said that PwC would "mothball" the Longbridge plant, keeping on just 600 workers to complete production on about 1,000 cars. About 400 staff will be retained at the company's Powertrain engine plant and 25 at MG Sport and Racing.

"The auctioneer is not coming in and selling it all off next week, we will be mothballing this facility so that we do have time to go back to SAIC and ask them to tell us if they do have any interest and precisely what that interest is, recognizing that they have of course acquired some of the intellectual property," Lomas said.